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It seems that nearly weekly we hear more good news on the solar energy front. Today, the Solar Energy Industries Association and GTM Research released their Solar Market Insight Report for Q3 2012, with a summary of accomplishments year to date. The progress is impressive and would have been unimaginable just five years ago. Furthermore, the growth is expected to continue for the next several years, jumping from 3.2 GW in 2012 to 7.8 GW by 2015. Some highlights from the report:

By the end of 2012, an estimated 3.2 gigawatts (GW - or 3,200 megawatts) of solar power will have been installed – an increase of 70% over last year.

The multi-year pipeline for solar-scale programs is finally reaching fruition, with some very large projects coming on line.

California, New Jersey, and Arizona are leading the charge.

Solar costs have fallen by over 30% in the past two years.

One of the macro factors driving this expansion is the vast overcapacity currently affecting markets. It is estimated that panel manufacturing capacity currently outpaces demand by a factor of over two to one (70 GW to 31 GW). This lack of equilibrium cannot last forever and should result in more plant closures – especially since global demand is growing at 14%. It will be interesting to see what happens to prices once supply-demand equilibrium gets back in balance.

Another dynamic worth observing is that the markets are incentive-driven and highly balkanized. For example, New Jersey, with its perhaps overly exuberant rebates, is slowing down, as is Massachusetts. At the same time, other markets ramp up. Overall, though, the year-over-year increase has been remarkable.

U.S. PV Installations by Market Segment, Q1 2010 to Q3 2012

One big force driving demand is the fact that 21 utility-scale projects – ranging in size from 300kW to 115 MW - were completed in Q3 of 2012. Looking at the pipeline going forward, these numbers will grow for another two years as projects in development move to completion. But once that “pig moves through the python,” the numbers are forecast to fall off significantly. There are just not that many new power purchase agreements (PPAs) being signed. These utility-scale projects have led all sectors in pricing improvements, but every sector has benefited over the past two years as panel prices fall while efficiencies in installation costs kick in.

Average Installed Price by Market Segment, Q1 2011 – Q3 2012

So what does the future look like? SEIA and GTM Research forecast continued aggressive growth for the foreseeable future. From a figure of 1.9 GW in 2011, the installed capacity is expected to increase four-fold in just five years. It is pretty unlikely that this trajectory can continue at that pace. However, even if it slows significantly, or levels out, that’s a good deal of new capacity.

Between the improved conversion efficiencies, manufacturing gains, decreased inverter costs and improvements in other balance of system (BOS) costs, there is still room for substantial price improvement. The US Department of Energy’s SunShot Initiative has a goal of making PV cost-competitive without incentives by reducing total PV costs by approximately 75% between 2010 and 2020.

With costs down an estimated 30% over two years, significant progress has already been made. Even in the absence of new technological gains, the experience of other countries suggest that the hoped-for Sunshot cost efficiencies may well be achievable. A comparison of US residential and commercial systems installed in 2011 vs German systems quoted (not perfectly comparable data, but helpful for analysis of trends), show big price differentials. Under 10 kW, the installed price per watt is $6.13 vs $3.40, a difference of $2.73 (or 45%). For systems between 10 and 100 kW, the delta narrows to $$2.52 (still 45%). For systems in excess of 100 kW, the figure decreases to $2.27 (or 47%).

All of the recently available data thus continues to point us in the same direction The march of solar energy is sustained, steady, and likely to make great strides in the years to come.